Thursday, June 08, 2006

Awash in wine, Europe decides to burn the excess

Bastards. The EU is going to prop up prices by paying France and Italy to turn the excess vino into fuel. Given that Europe is a serial over-producer, this plan could get expensive.

The European Union agreed Wednesday to pay France and Italy to turn 560 million liters of surplus wine into fuel or disinfectant to support prices in the 25-nation bloc.

The so-called crisis distillation measure, part of the EU's €1.3 billion ($1.7 billion) wine budget, has been used in four of the past six years to keep excess wine from undermining the domestic market. Agriculture Commissioner Mariann Fischer Boel, who wants to scrap the practice, said that EU wine making must be overhauled to compete with growing exports from the United States, Australia, Chile and other so- called New World wine producers.

"Crisis distillation is becoming a depressingly regular feature" of the EU's wine programs, she said in a news release from Brussels. "While it offers temporary assistance to producers, it does not deal with the core of the problem - that Europe is producing too much wine for which there is no market."

The EU, which makes and drinks around 60 percent of the world's wine, has distilled an average of 10 percent of its total production annually since 2000, according to the European Commission. Distillation programs cost €512 million in 2004, or more than 40 percent of the total wine budget.

The bloc in 2004 exported almost 1.4 billion liters, or 370 million gallons, of wine worth about €4.5 billion. That is only an increase of 200,000 liters since 1996. In comparison, exports from the United States have climbed fourfold in the last decade and those from Chile and Australia by 19 times, the EU said.

The decision by European governments, which will cost €131 million, gives France the right to distill 150 million liters of quality wine and another 150 million liters of table wine into industrial alcohol. Italy was granted a limit of 260 million liters. [...]

"This will not stop" without "a reform which will reinvigorate our wine sector," Fischer Boel said last month. The commission is scheduled to publish a report with proposals for change on June 22. That will be followed by legislation later this year or early in 2007. [....]

As someone who really enjoys French and Italian reds and whites, I pray this subsidy ends and prices come down. Wine all the way from Chile or Australia is often cheaper than that from Europe for us. Lower the prices and the market will buy up every bit of surplus wine. Guaranteed.

Good luck, to the Agriculture Commission, though. France sees any dimmunation of agriculture subsidies as an act of war.